Before we delve too deep into the world of stocks and figures, it pays to know what we’re talking about. Put simply, investing is the act of committing money or capital to an endeavour with the expectation of obtaining an additional income or profit. While this certainly sounds like a major cash injection, that’s not always the case. The key to investing for beginners is understanding why you are entering the market in the first place.

Aside from the obvious financial gain, investing in stocks has some other major benefits. Sure, the overall goal may be to build your finances, but there will also be opportunities to use your stock investment knowledge to develop further business, professional and personal in-roads. Here are some other reasons people invest in stocks;

Like all transactions, you make money from stocks by buying when the price is low and selling when the price is high. The difference between the two will be your capital profit or loss.

One of the biggest questions you need to ask yourself before you start investing in stocks is what kind of investor you want to be. It is unlikely that you will see significant returns on any investment you make without putting forward substantial capital, but therein lies the predicament. With any kind of financial investment, it pays to be cautious and measured in your approach, however, there are options at every level of activity and knowledge.

Investing for beginners can be an intimidating situation. Understanding what it is that you are looking to do is one thing, but navigating the complex financial world to make it happen is another. Here are some basic things you need to be aware of before you learn how to start investing.

On a basic level, if you want to start investing in stocks, you will need to employ the services of a broker. Brokers can be either full-service or discount. Full-service brokers offer a full range of traditional brokerage services, including financial advice for a whole gamut of investing avenues. That could be;

There are certainly some considerations that you need to be aware of when it comes to choosing the right broker for you. These include;

Once you’ve got your mind made up on a broker. you’ll need to follow a few steps. Namely, to sign up to a broker in Australia, you’ll need to be at least 18 years old and an Australian resident. From here, registering for an account with a broker is usually free, however, you may incur subscription fees or fees to transfer funds to your account. New customers will need to provide;

So, you’ve come this far and you’re still keen to start investing in stocks. The good news is; you aren’t alone, particularly in light of recent global economic conditions. “We’ve seen the pandemic play a huge role in people getting started in investing,” Robert Francis, Australian managing director of investing platform eToro says. “So far this year, we have seen a 100 per cent growth in numbers of new registrants on eToro worldwide in H1 this year compared with the same period last year. The pandemic-induced market volatility has put the topic of investing front of mind for many.”

Once you’ve made the decision to start investing in stocks, you really need to get a handle on your own personal finances. Make an appointment to visit your local bank branch or accountant and have an open and honest discussion about your financial capacity. There are stocks to be made at any budget, but knowing your fiscal limitations is critical. It’s important to remember that investing in stocks in a long-term financial decision, not glorified gambling.

“The stock market can be riddled with terms that you must understand before trying to navigate the market,” Francis says. “Once you’ve learnt the basics, you may want to learn how to read charts and monitor things like moving day averages or RSI, which shows the volume at which a stock is being bought or sold.” Here are some of the common terms to get across;

“The world’s best investors invest in companies they know well or are passionate about,” Francis explains. “For example, if you love tech, you may decide you want to buy stock in Apple or Microsoft. If you’re yet to find your niche, I’d suggest checking out the social feed on eToro to see what companies people are talking about, or spend some time reading finance publications or listening to podcasts.”

“Start small, but invest regularly. It’s a common misconception that you need a lot of money to make investing worthwhile,” Francis says. “On eToro, you can open a stocks position with as little as $50 USD.”

“Don’t put all of your eggs in one basket. Investing in businesses from various sectors will help build a broad portfolio that spreads out and effectively lowers your risk,” Francis says. “Investing $1000 across 10 or so companies is much smarter than investing $1000 in one.”

As we said, it’s important to remember that investing is a long-term game. “Adopt a longevity mindset when it comes to investing. If you’re chopping and changing your investments frequently, you could miss out on profits because these companies might not have had the chance to reach new resistance levels. You’ve also got a better chance of riding out any market volatility,” Francis explains.

While there is money to be made investing in stocks, the costs can stack up. Here are the costs that you will encounter in your investing journey.

In Australia, there is a minimum investment of $500 for every new ASX company that you invest in. Even if the shares you plan on buying are valued at $5, you’ll need to purchase 100 in order to make the investment if it’s your first time buying.

Yep, sadly even on your savvy investments, you’ll need to pay tax. In Australia, any income you make from dividends is automatically recorded by the Australian Taxation Office (ATO) and is included as part of your regular taxable income at tax time. Conversely, profits that you make on capital gains (when you buy low and sell high) are only counted in the financial year that you’ve sold your shares. Your broker should send you a tax invoice with any profits that you’ve earned from stocks each financial year.

We’ve already touched on this before, but commission fees are an often overlooked part of the process, particularly when it comes to investing in stocks for beginners. Brokerage fees can be anywhere around $10-$30 on share trading platforms, all the way up to $50-$150 for full-service brokers. That being said, certain platforms offer commission-free options. For example, eToro launched zero commission stocks and fractional stocks in Australia in May. Additionally, you may encounter currency conversion fees (for foreign stocks), account fees, custody fees (for US stocks) and inactivity fees. Make sure you factor these fees into your forecasting.

While investing for beginners is getting easier and easier, particularly with the rise of trading platforms, you can still run into trouble. Francis says there are three common issues new investors often make.